Yuri Barsukov’s column on new risks for Russian business

The events of June 23-24, the scale and significance of which we have yet to grasp, had surprisingly little immediate effect on the business as usual in Russia. Traffic congestion on highways in central Russia turned out to be the most serious problem. However, they began to dissipate as early as June 25, after ditches across the M-4 highway, dug a few hours earlier, were sealed in record time.

Air traffic was not interrupted, although many passengers were late for flights due to traffic jams. Some citizens, having not learned the bitter experience of 2022, generously shared their income with airlines to get abroad, while others with banks in an attempt to buy foreign currency.

By Monday, both the ruble exchange rate and airfare prices returned to “rebellious” values, repeating with variations the scenario that we could observe during the pandemic lockdowns, in February-March 2022 with the start of the NWO, and in September 2022 with the announcement of mobilization. The rebellion did not affect the work of large enterprises and strategic industries in any way.

Nevertheless, it is difficult to expect that such an event will not affect the business environment in any way. First, it will obviously be much more difficult to attract foreign investment and look for partners, including for the supply of components, since foreign companies will wait for the situation to be clarified and assess new risks.

Secondly, even Russian companies can reduce investments and stop development plans, as they already did after the outbreak of hostilities in Ukraine and the first wave of sanctions: businesses will need to make sure that there are no signs of an aggravation of the situation.

Thirdly, the population may again return to the pattern of increasing savings and limiting consumption, which was established in the first half of 2022 amid huge uncertainty. It was the recovery of consumption, coupled with an increase in budget expenditures, that was the main factor in the successful dynamics of the Russian economy over the past year, despite sanctions and lower energy prices.

Until now, Russian business has shown itself remarkably resilient in the face of a wide variety of external challenges, but it has not faced political instability for three decades. A generation of managers and even owners of companies has grown up that cannot work in such conditions, and the structure of the economy with a high share of the state in such a situation is potentially more vulnerable. There are risks here, but it is pointless to make any forecasts: as the events of the past weekend showed, now in Russia you can make plans for a maximum of a day in advance.